David Sheppard, Gleadell’s managing director, comments on the wheat market

US markets have moved to four- to five-year lows this week as the potential of a record US maize harvest and larger-than-expected stocks weigh on prices. A rise in the US$ is also detrimental to US wheat prices, already priced at hefty premiums to other origins.

EU prices (MATIF) have bounced this week on improved export prospects, although with the French writing off Algeria this season, they need Egypt, hence the recent sales at the last couple of tenders.

The rise in domestic prices witnessed in Russia has left the nation uncompetitive on exports, with the French in pole position on feed/low grade supply and Germany and the Baltic states looking after the milling quality. A rare sale of ‘feed wheat’ loading for Spain should free up some silo space in Rouen, although you rob Peter to pay Paul, as an even rarer Canadian milling wheat shipment is due to arrive in France this week.

The UK market remains a spot affair, with buyers looking to cover requirements. Despite the strength of sterling, the LIFFE complex has remained resilient, not falling on a one-for-one basis with the other exchanges. The recent global pressure has seen UK ex-farm prices drop below £100/t for the first time in four years, leaving growers facing a key psychological barrier.

Although much talk is ripe about increased domestic demand and North African interest this season, the UK is still struggling to get exports away, leaving the potential of a carry-out at the end on the 2014/15 of over 3mln tonnes, the most since the days of intervention stores for those who can remember that far back! However markets cannot / do not go down every day and we will see rallies that represent opportunities to trade at better levels.

With all markets this week moving to four to five year lows, it can only be expected that at some time this will provoke a ‘bounce’ in the market. News that Russia has withdrawn from the export market is more rumour than fact. Strong domestic demand has pushed up Russian internal prices, leading to the nation losing its competitive edge on global export markets.

Cheaper wheat offered from other origins – France (feed/low grade) – is seen undercutting Black Sea wheat at present. France needs Egypt, but Russia will also need them! Even with Mr Putin’s ‘intervention’ the Russian wheat surplus is still between 10-15mln tonnes, and at some stage they will have to price themselves back into the export markets. The news about Russia’s export disappearance is a rumour, and as proven already this season, ‘sell the rumour buy the fact’.

• USDA reports higher-than-expected wheat/corn quarterly stocks – further stock increase likely in next week’s report.
• International Grains Council raises 2014/15 global wheat and corn crop outlook – stocks also increased.
• Russian grain exports remain brisk, up 27% year on year as of 17 Sept (wheat at 9.216mln tonnes).
• Russian wheat prices fall, pressured by global markets. Losing competitiveness in those markets. 
• Ukraine’s Ag Ministry raises 2014 grain crop forecast to record 64.4mln tonnes, plus larger maize crop
• Ukraine’s grain exports reported at 8.35mln tonnes as of end September, including 4.76mln tonnes wheat and 2.87mln tonnes barley.
• UkrAgroConsult raises Ukraine’s 2014/15 wheat export forecast to 10mln tonnes, up from 9.5mln tonnes.
• China’s market information provider CNGOIC forecasts 2014/15 wheat production at record 125.3mln tonnes, up 3% year on year.
• Strategie Grains raises EU-28 corn.
• CWB reports wheat quality a ‘major concern’ in grain being harvested.
• Australian 2014/15 wheat output seen down 11% year on year due to dry weather.
• Egypt’s state buyer GASC purchases 120,000 tonnes of French wheat for 1-10 November shipment.